Auckland Council’s finance & performance committee agreed yesterday to get a “financing proposal” on 2 buildings – its 135 Albert St headquarters & 35 Graham St property administration building – most likely leading to their sale.
Council staff have been working on options for 10 council-owned buildings which Cameron Partners identified for review, but the financial planning manager for council-controlled organisations, Robert Irvine, said the list had been narrowed down due to legal constraints over titles and some being caught up in growth in their areas, such as the former Manukau City Council chamber & offices.
All 10 properties had a 2014 capital value of $311 million, well short of current market value, led by the council’s Albert St tower at $133.5 million. The Graham St property was valued at $32.5 million.
Mr Irvine said in his report: “The preliminary assessment indicates that a full sale & leaseback best aligns with the considerations that underline an ownership versus lease decision. The considerations being: the necessity for holding control of the asset, the level of operational risk an organisation wishes to hold, the financial impact, and the organisation’s capital scarcity.
“Preliminary analysis of Auckland Council’s corporate property portfolio indicates that there is no necessity for maintaining ownership control of the 2 corporate office buildings. It divests some operating responsibilities and will provide debt headroom.”
He said the underlying reason for government organisations to lease assets rather than own appeared to be capital rationing: “Where Auckland Council must borrow in order to fund a property purchase, it could be beneficial to rely on the private sector to provide that capital and simply pay for accommodation through a lease arrangement funded out of rates. This means the capital can be deployed elsewhere. For Auckland Council this could be stormwater & transport infrastructure.”
Chief financial officer Sue Tindal said any decisions the committee makes would then go out to public consultation, such as sale of buildings or airport company shares.
John Tamihere said it could be confusing, “death by a hundred cuts”, but “You have to see how it’s all wired up. What the city needs to get its head around, officers as well, you’re now getting to a level of requirement akin to a Cabinet type of paper and the rigour that goes into a bunch of those.
He said this could require review of the quality of documentation coming before the council.
To a question from Cllr Chris Darby, Kevin Ramsay said the option of bundling the council’s properties into an investment fund would be in the mix when staff reported again.
Cllr Mike Lee expressed concern that sale of the buildings kept being tied into ownership of Ports of Auckland Ltd & Auckland International Airport Ltd shares, and once more dragged in the presence of Independent Maori Statutory Board members at the committee table, which he’s constantly & vociferously opposed.
Cllr Linda Cooper said the 2 groups of assets were being considered separately: “I do want to rationalise some of the buildings we’ve got. We’ve got far too many buildings,” she said.
Cllr Wayne Walker said the council didn’t have a long-term vision for its accommodation, including council-controlled organisations, and an integral part of that was the civic administration building which the council intended to sell.
The call for a report on financing options for the 2 buildings was approved.
Link: Committee agenda
Attribution: Council committee agenda & stream of meeting.